More New York pre foreclosure homes are expected because of the rising number of homeowners considering strategic default. The sharp fall in home values and continued financial difficulties have been prompting homeowners to consider walking out on their mortgages.
The option of strategic default did not catch on as early and substantially in New York as in foreclosure-battered states like California and Florida, but as more New York homes plunge in value, more New York homeowners are considering voluntary foreclosure.
According to a research firm, more than 10 percent of all houses in New York or almost 117,000 homes, were underwater as of December 2009. In the prior year of 2008, an estimated 18,000 of all foreclosures in New York were voluntary. In 2004, there were only 529 strategic foreclosures across the state.
According to Manhattan bankruptcy attorney David Shaev, more middle-class homeowners are going to surrender their homes to their lenders as values plunge over the next few years. They will realize that it does not make financial sense to keep paying when values are falling.
Cuthbert Snyder is one among many New York homeowners who have already decided to walk away if their lenders continue to reject their applications for permanent loan modification. Snyder said that the house he bought for $309,000 years ago is now valued at only $150,000.
Although the number of New York pre foreclosure homes declined in the first two months of this year and although New York is not as battered as most other states, home values continue to fall in certain areas because of the effects of the recession.
Nearly 4,600 New York homes entered the foreclosure process in January and nearly 3,300 homes entered the same process in February.
In certain neighborhoods where there are plenty of foreclosed homes for sale, home prices have plunged by 20 to 30 percent. These sharp rates of decline have been prompting homeowners to look more deeply into their financial situation.
According to Jon Maddux, chief executive of YouWalkAway.com which guides mortgage borrowers through strategic default, the stigma of foreclosure has disappeared because of the millions of homeowners in foreclosure. The bitterness toward financial institutions which are largely to be blamed for the housing crisis is also making a strong push for homeowners considering voluntary foreclosures.
In certain neighborhoods in Queens, the Bronx and Brooklyn, more New York pre foreclosure homes are expected to enter the market if values do not stop falling.